United Spirits close to 49% stake sale in Whyte & Mackay

Nearly six months after he put the stake sale process of Whyte & Mackay on the fast track to find a solution to United Spirits' high leverage, UB Group Chairman Vijay Mallya is understood to be nearing a deal to offload 49 per cent stake in the flagship subsidiary.

United Spirits Ltd (USL), which has 55 per cent market share in the Indian spirits market, had acquired the Scotland-based whisky major Whyte & Mackay in a highly leveraged $1.2-billion deal in 2007.

USL is under debt of Rs 8,600 crore (Rs 86 billion). In four major steps during the past two years, the company has raised Rs 2,500 crore (Rs 25 billion) to pay back part of the debt.

It is understood that Mallya is in advanced discussions with global private equity majors for the transaction. USL's management has been maintaining it would certainly tap into Whyte & Mackay to deleverage.

The move to unlock value in the flagship subsidiary comes at a time when there is a buzz in the market that Mallya may also be nearing

a deal to cede control in United Spirits itself in favour of Diageo.

The management of UB Group has been categorical in denying such a move and has maintained there is a need for a strategic global partner in United Spirits, akin to Heineken holding an equal 37.5 per cent stake in United Breweries, a UB Group company which has a market capitalisation of around Rs 17,000 crore (Rs 170 billion).

Mallya is racing against time to undo the Rs 8,000-crore (Rs 80-billion) debt burden on Kingfisher Airlines. UB Group promoters hold close to 28 per cent stake in United Spirits, which has a market capitalisation of around Rs 12,900 crore (Rs 129 billion).

The market buzz is that Mallya is looking at a price of Rs 1,300 a share, a premium of 30 per cent on Monday's closing price of Rs 986.50 apiece on the Bombay Stock Exchange. However, there is a major hurdle in the shape of USL's wholly owned subsidiary Whyte & Mackay.

If Diageo acquires a significant control in USL, it will lead to indirect control over Whyte & Mackay, to which the European anti-monopoly body would object.